The French financial regulator Autorité des Marchés Financiers (AMF) has announced that the AMF Enforcement Committee has fined a French affiliated agent of a Cypriot investment services provider and its director a total of €400,000 for breaches of their professional obligations.
In its decision of 10 November 2023, the Enforcement Committee fined France Safe Media (FSM) €300,000 and banned it from acting as a tied agent and from providing an order receiving and transmitting (RTO) service for 10 years. It also fined its manager, Lior Mattouk, €100,000 and banned him from managing or directing any entity that acts as an affiliated agent and provides RTO services for 10 years.
The Enforcement Committee identified five series of violations for events that took place between January 2019 and September 2021, in relation to FSM’s RTO activities on behalf of third parties. As an affiliated agent of the Cypriot investment services provider VPR Safe Financial Group Limited, FSM offered its clients the opportunity to subscribe to contracts for difference (CFDs) through accounts accessible on an online platform called ‘Alvexo’. A connected agent is an intermediary acting on behalf of a service provider.
Alvexo is a Cyprus-based brokerage brand with a focus on France and Italy Retail FX and CFDs. We note that VPR / Alvexo itself faced some problems with its regulator in Cyprus. In 2021 Alvexo VPR was fined €100,000 by CySEC for CFD marketing. And in August 2022 CySEC partially suspended VPR/Alvexo’s CIF license regarding a number of violations, including unfair, honest and professional behavior in providing investment services to clients and misleading advertising. VPR’s license was reinstated by CySEC last month.
As regards the fines on FSM and Lior Mattouk, the Commission found that FSM had not demonstrated that it had checked that its sales staff had minimum qualifications and an adequate level of knowledge and that FSM had provided the inspection team with a test to assess the knowledge of its sales staff which was established after the start of the investigation period and whose content was insufficient.
He then pointed out the inadequacy of the questionnaire used to assess customer knowledge and experience and the inappropriateness of the scoring system associated with that questionnaire. In addition, it found that account managers interfered with the process of evaluating potential customers by asking them to change their answers or re-fill the questionnaire, thus rendering the questionnaire useless. The Commission considered that FSM was therefore unable to determine whether its customers or potential customers had the necessary experience and knowledge to understand the risks associated with the products or services offered.
It also found deficiencies in the FSM’s promotional communications for CFDs, pointing to the absence of adequate warning about the risks associated with CFDs in advertising banners and non-compliance with the ban on the promotion of CFD accounts other than limited risk accounts.
In addition, the Commission found that FSM failed to comply with its obligation to inform its customers and potential customers of its affiliated representative status and the identity of its principal when it contacted them.
Finally, it found that FSM did not exercise due care and diligence in relation to the audit.
The Commission found that the FSM’s failures were due to its director, Lior Mattouk.
The AMF noted that this decision may be appealed.